1."Does financial literacy explain investment in risky assets in Japan?"This study aims to investigate whether financial literacy is a
significant determinant of investment in risky assets in Japan. We
perform an instrumental variables (IV) estimation using data from the
Preference Parameter Study, a nationwide survey carried out by Osaka
University. Both subjective and objective financial literacy measures
are employed to investigate the relation between financial literacy
and the lack of risky investment. Using investment in stocks,
investment trusts, and futures/options as a proxy for investment in
risky assets, we show that neither measure of financial literacy has a
significant impact on investment in risky assets after controlling for
demographic, socio-economic, and psychological factors. Contrariwise,
our results show that financial literacy overconfidence, the positive
difference between subjective and objective financial literacy, plays
a significant role in explaining the link between financial literacy
and investment in risky assets. Moreover, if the financial literary
overconfidence is high, subjective financial literacy has a
significant and positive impact on risky investment whereas objective
financial literacy has a significant and negative effect on investment
in risky assets. Finally, our results are robust to different model
specifications that use alternative measures for investment in risky
assets.

1."Production inefficiency, cross-ownership and partial tax coordination"Using a simple asymmetric capital-tax competition model where the allocation of mobile capital
is distorted in non-cooperative equilibrium, this paper analyzes the welfare impact of tax coordination
made by subsets of regions. Under the assumption that the ownership of immobile factors (e.g.,
business land) is diversified across regions, a new possibility of beneficial tax coordination arises which
has not been identified before: reducing the difference in tax rates “between capital-exporting regions”
or “between capital-importing regions” may improve the welfare of all regions. This is in contrast to
the case without cross-ownership where tax coordination must be made “between capital-exporting and
capital-importing regions” to achieve Pareto improvement.

2. "Taxing Multinationals: The Scope for Enforcement Cooperation (joint
with Jean Hindriks)"We present a tax-competition model with two policy instruments: the corporate tax rate and the tightness of tax enforcement (i.e., controls on profit shifting by multinational enterprises). Tougher enforcement increases the cost of profit shifting, and thus mitigates tax competition. In a framework of noncooperative tax choices, we compare the equilibria of the noncooperative and cooperative enforcement choices. After showing that enforcement cooperation may not benefit the low-tax country, we indicate two drivers that promote enforcement cooperation. The first driver of cooperation is complementarity (imperfect substitutability) of countries’ enforcement efforts, taking into account that dispersed enforcement efforts among the involved countries are less effective. We show that cooperation is more likely with greater enforcement complementarity. The second driver of cooperation is tax leadership, which reduces the extent of disagreement on tax enforcement.

長谷川誠 (Makoto Hasegawa) (Kyoto University)
Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals

要旨

In 2009, Japan began to exempt dividends paid by Japanese-owned foreign affiliates to their parent firms from home-country taxation. This tax reform switched Japan's corporate tax system to a territorial tax system that exempts foreign income from home-country taxation. In this paper, I examine the impact of the territorial tax reform on the profit-shifting behavior of Japanese multinationals. I analyze the sensitivity of the reported profits of Japanese-owned foreign subsidiaries to the tax incentive for profit shifting, measured by host countries' tax rates, and the introduction of the territorial tax system, using US-owned foreign subsidiaries as a comparison group. I find that the profits of US-owned foreign subsidiaries, particularly intangible-intensive or large subsidiaries, are more sensitive to host countries' tax rates than are those of Japanese-owned foreign subsidiaries. I find no evidence that the sensitivity of the pre-tax profits of Japanese multinationals to corporate tax rates increased after 2009 relative to US multinationals. These results imply that Japanese multinationals are less sensitive to the tax incentive for profit shifting than are US multinationals.

1."Who is the Small Country Assumption for?"
In this paper we extend the horizontal tax competition by endogenizing the small country assumptions made by the competing asymmetric countries. For that purpose we consider a pre-play stage, where governments commit themselves to act as price-takers or non-price-takers. We show that the small country is always a non-price-taker, while the large country behaves as a small country when governments become more revenue-maximizing Leviathans. The main driving force for the result is that their goal of tax revenues rather than the utility of residents makes the fiscal externality more rigorous, but weakens the pecuniary externality. The higher the elasticity of capital, the more likely the capital exporting country becomes a price-taker at the cost of its residents' well-being.

2."Minimum Wage Competition"
This paper challenges the view that factor mobility leads to shrinking minimum wages. By focusing on geographical mobility, we propose a minimum wage competition model and show that minimum wage rates may be increased after the significant increase in mobility. This result is consistent with the data on European countries in the period of the massive enlargement of the EU. We also show that minimum wage rates respond positively to increased geographical mobility when (i) mobile workers face significantly worse labor market conditions, (ii) the concerns of economic efficiency are small, and (iii) the share of mobile workers is relatively small. The model also yields a normative implication that coordination in setting minimum wages is needed to achieve a desirable outcome.